When Dave Rainer, the former president of U.S. Bancorp. in California, decided to open his own bank earlier this year, he hoped to raise $25 million in a private offering from a few hundred business owners in the San Fernando Valley.

Rainer was shocked when investors lined up to pour money into the new Encino-based California United Bank.

The institution drew commitments for $62 million from 700 investors and had to send nearly half the money back. Last month, California United opened its doors with a $35 million initial capitalization the largest of any new state-chartered bank in California history.

“It’s exhilarating with a lot of pressure to perform,” said Rainer, who is president and chief executive. He has spent his career buying banks, selling banks and fixing banks but has never started one from scratch.

California United Bank raised the bar set by two other new banks in Southern California, whose experienced management teams had already blasted through previous capitalization records.

Last year, Alan Rothenberg and Richard Cupp opened 1st Century Bank in Century City with $26.4 million raised from 400 investors. In 2003, William Lyon, chairman and chief executive of developer William Lyon Homes Inc., opened Commercial Bank of California in Costa Mesa with $27.4 million in capital from 36 original investors.

“As an alternative investment, small banks look very good in the last five years,” said K.P. “Bala” Balkrishna, president and chief executive of Commercial Bank of California.

The larger the initial capitalization, the more aggressive a new bank can be in adding branches, making loans and attracting deposits.

Balkrishna cautioned that it isn’t easy to leverage such a large amount of capital. Yet in Southern California, “de novo” banks (those in operation for three years or less) are performing better than any class in the past quarter-century as measured by return on equity, according to Ed Carpenter, chief executive of Carpenter & Co., an investment bank in Irvine that specializes in new banks.

One reason: consolidation has led to a dearth of banks serving small and medium-sized businesses, particularly those that need to borrow up to $5 million to expand.

“The California market is underserved by the number of banks and branches and that’s one of the fundamental reasons why the growth of new banks continues unabated,” said Cupp, 1st Century’s president and CEO.

Since beginning trading on the over-the-counter market at $20 in early June, shares of California United Bank were trading at $16.25 last week. Original investors got in at $10.

(Because the bank is not a holding company, it did not have to file an S-1 registration statement with the Securities and Exchange Commission to begin trading. If it has 500 public shareholders after its first year, or if it’s to become traded on the Nasdaq Stock Market, it will have to file with the SEC.)

California United Bank is not so much a new bank as a new incarnation of a bank with the same name.

In 1992, Rainer teamed up with Steve Carpenter, a former vice chairman at Security Pacific Bank, to buy another bank that was called California United Bank. It was struggling under the recession and the fallout of the savings and loan crisis. Rainer and Carpenter refocused California United on lending to small and medium-sized businesses. By 1997, the bank had become so successful that the veteran bankers accepted an unsolicited offer to be bought by Bank of Hawaii.

The Asian financial crisis hit, forcing Bank of Hawaii to shift its attention away from the new bank. Rainer eventually returned to his roots in Southern California, landing at Santa Monica Bank, which was bought in 1999 by Minneapolis-based U.S. Bancorp. There, he started climbing the corporate ladder, and ultimately headed the bank’s operation in California. But he got tired of spending time on airplanes, away from his family and found that Bank of Hawaii had allowed the rights to the California United name to lapse.

Banks were being formed in San Diego, Orange County and San Francisco, but not in the San Fernando Valley. Rainer wanted to recreate the excitement that had allowed the old California United to expand, so he drummed up support from the bank’s former executives.

So far, the new California United has attracted 21 executives. All but four worked for Rainer at some point in their careers, and 11 worked at the first California United in the mid-1990s.

They include Anne Williams, the bank’s executive vice president and chief credit officer, who hailed from U.S. Bank; Anita Wolman, senior vice president and legal counsel, who left the same post at Citicorp; and Debby Hart, senior vice president and director of bank operations, who returned after a stint at Wells Fargo.

“I thought it was a good time to come back,” said Rainer. “It’s a dream of mine coming true.”

*Staff reporter Kate Berry can be reached at (323) 549-5225, ext. 228, or at

[email protected]

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